Neal Dingmann, research analyst here at William Blair. Covers USA Rare Earth. A complete list of the research disclosures or potential conflicts of interest, please visit our website at williamblair.com. With that, I talked to Rob. We'd want to do just the boring presentation. I told Rob, let's do maybe state of the nation, make sure people understand. I know Rare Earth has been in the news a lot. We were just talking about our schedules. He's been all over, not only here in the U.S., but him and Barbara. In fact, Barbara's in France today. Rob is here. They're getting called into D.C. a lot. Maybe Rob, start with just sort of a state of the company.
Give us a little background for some of the folks here that are a little bit newer. There for a few minutes, and then again, we can go into a little bit of questions as well.
Sure. Thanks, Neal. It's terrific to be here, and I appreciate the terrific turnout. To tell you a little bit about our story, we, at the company, have believed for several years that there was an absolute need to reshore a broad rare earth capability. Magnets, metal-making, mining, processing, separation, and supplying a range of critical minerals and oxides to the U.S. and global market, given the fact that China essentially has a stranglehold on the market. They control, depending on the math you use, somewhere between 90%-98% of all processing somewhere touches China right now, globally. That's obviously a huge issue for national security, both for national security for military and defense, but also for our industrial security, is extremely a big issue. We saw this opportunity. We went public about 14 months ago.
At that time, we had about $25 million in cash, a little less than that. We were determined to execute on our plan, and we're fortunate to bring several investors along the way with us. We were able to raise $75 million last spring. We set about with that to stand up our capability. We began investing in our magnet-making capability in Stillwater, Oklahoma, with initial plans of somewhere between 3,000-5,000 metric tons. We are in the process of developing our deposit and switching to solvent extraction from continuous ion exchange, and working through that. With that, over last summer, we developed a strategy as we saw, given that we sort of had the barbells.
We had a deposit and we had magnets, but we didn't have anything in between, and we needed to stand up that market, and we knew we needed to stand it up quickly. We immediately executed upon the LCM transaction, giving us metal-making capability, the ability to take oxides and turning them into metal, a capability that also virtually was gone outside of China. Began to raise more money, and recognizing that we needed to not only stand up additional capability, but work with the U.S. government, quickly got to the announcement of our LOI with the Department of Commerce in January. We raised $1.5 billion with that transaction. Began to complete other elements of what we now call our value chain. We announced the agreement to acquire Texas Mineral Resources Corp., our 20% joint venture partner.
We announced a 12.5% investment in Carester, which is a very unique light and, in particular, heavy rare earth processing capability in France, one of the leading technologists in the category in the world. We announced the Serra Verde transaction, which is an outstanding deposit, very unique, has both lights and heavies in South America, and they will be selling their product. I say they, we will be selling that product into an SPV that's already been stood up and is supported by the U.S. government and private capital.
Where we are today is moving from that small company with a plan of 3,000-5,000 metric tons of magnets to a company now that's planning to produce domestically over 10,000 metric tons of oxides once we fully stand up our processing capability here, 10,000 metric tons of metal in the United States, and 10,000 metric tons of magnets. We're going to do the metal-making and magnet-making at two different facilities. We just announced today our second facility, which is going to house a little bit more than 50% of our metal and magnet-making in Blacksburg, South Carolina. We are doing this with two facilities to increase the certainty and to provide us with business continuity with two locations going forward. That's where we are today.
Perfect. Well, maybe start with, again, back up, make sure everybody understands here. You think about the mine to magnet strategy again. In my oil and gas days, I still call it upstream to downstream. When you look at that business, and again, you've mentioned everything you've added along the way, could you talk about, do you see a bigger bottleneck as it sits today? I see Gary over there with U.S. Antimony. I feel like whether it's antimony, I figure whether it's rare earth, whether it's critical minerals, with now China's stranglehold, do you see the bottleneck all the way from upstream in the mining all the way down to downstream of the magnet? Where you see the biggest bottleneck.
All these components still need to be stood up. Right now what we have is capacity planned and capability. We have both of those pieces. At the mining level, it's twofold. It's Serra Verde scaling into production, full production, run rate production of 6,400 metric tons per annum of TREO. That'll happen over the course of the next six months or so, as that business comes online. It's Round Top moving from where it is today as a deposit and into our definitive feasibility study and having that capability stood up, which will take place through the second half of 2028.
At the metal, it's taking the capability we have at LCM and bringing that to the United States, and that capability will be stood up over the next 2.5 years. Similarly with magnets over the course of the next three years. The point being is the bottleneck is everything getting stood up. It is literally growing the business. The capability is here, the capacity is here, the capital is here. It's just all about execution.
Speaking of the capital, again, you all have been very involved with the government. From the moment Barbara's hit the ground, her D.C. roots. Can you talk about, sounds like you and I were talking about here before we just started, continued visits, continued conversations with the U.S. government. Again, do you anticipate the government continuing to partner with you all? I guess maybe even step back, make sure everybody here understands. How much the government, you've already done with the government.
The governments are involved with us. The United States government is involved with this through the Department of War, through the DFC, through Serra Verde, with about a $565 million, essentially a project finance facility, which fully funds Serra Verde into run rate production. The Department of Commerce, we're finalizing our definitive agreement with them, which is imminent. That should take place shortly, that is a $1.6 billion funding package to support our growth here domestically in the United States. The Department of Energy has issued us grants to be able to continue to develop our continuous ion exchange. We have incentive packages from the state of Texas, $14 million under the CHIPS Act. We have an incentive package from South Carolina for our Blacksburg facility. We have smaller incentives from the state of Oklahoma, which we've disclosed.
We also have an expression of interest from the government of France. That's where our CEO is today, speaking with President Macron about funding our Lacq rare earth metal and magnet-making capacity alongside Carester in the south--
That government will help, even the France government will help fund that as well, correct?
Yes. That's right.
Okay. Do you anticipate, so when you look right now, if you start upstream, you have, of course, Serra Verde, which you recently purchased. You have Round Top. You start moving, again, up the chain again with Carester. You have the processing, then you have LCM with the metal making. Of course you have, where I've been several times in Stillwater. Will all of those be simultaneously now funded? Is the plan to grow one over the other? Do you try to grow all of it at the same time?
I mean, it's-- It truly is a value chain. The goal is to grow it all at the same time. If we could bring Round Top up and running faster, we would. Round Top's still just going to take two and a half years to get that stood up. Essentially, think of the actual manufacturing process as being stood up in sequence, meaning metal-making will be stood up about three to six months in advance of the related magnet-making capability in the U.S. We will be feeding that with third-party feedstock through LCM and through Carester, as well as third-party sources. Then over time, Serra Verde feedstock will be going into that as well as Round Top feedstock will be going into that.
For offtake, it seems like, again, there's always folks. I know, as I said, I've been to your plant now several times, and every time I'm there's somebody coming in, coming out, customers coming in, coming out. Maybe talk a little bit about potential offtake agreements, things. Is the ball in your court, you're waiting for? Somebody asked me the other day why you and the team are so bullish, the group, and my comment is always, "I've never seen where you see this kind of insatiable demand." I guess two questions there.
Yeah. I mean, the hardest part our team has is they're trying to stand up a factory, but they also need to meet with customers. We have a lot of people coming through because the way the customer process works, the first thing they want to do is they want to see if you're real and if you have the capability. U.S. companies, defense, non-defense, industrial, are very interested in getting capacity outside of China. They want to get it here.
What they're doing is coming back, coming to us to get to know us, coming back and back again and again to see how we're standing up that facility over time. The way our agreements are going to work will be, frankly, they're going to be multifaceted over time.
Okay.
Initially, they'll probably be shorter-term purchase agreements, so short-term POs for trials with a particular part. Think of a magnet as a complex part. Then over time, as we prove our ability to perform and capacity, that's when you start getting offtakes, when people know that capacity. When you think of an offtake, you're thinking about large-scale supply over time. We only have 600 metric tons per annum commissioned. Today, which is relatively small. If you're thinking about an automotive company, they're going to want several thousand metric tons. They're only going to order it once they have confidence that you can produce.
Okay. Yep. Maybe starting upstream a little bit, could you talk about, you have Serra Verde now again, I know you talked about an offtake that's already locked in on that. How will you balance that in Round Top to organically build out Round Top while now having Serra Verde? How do the two sort of play together?
Yeah. They are two completely different teams, first and foremost.
Okay. I was going to ask that.
The team at Serra Verde has been working on that project, some of them as long as it's been in existence.
Okay. About 12 years.
That is a full team down there. That is an ionic clay deposit, which has a particular type of extraction. They use continuous ion exchange today, which is a different technique than we're using at Round Top. At Round Top, we're going to use leach into a solvent extraction process. What Serra Verde produces today is an intermediate stage product called an MREC. Mixed rare earth carbonate.
At Serra Verde?
At Serra Verde, that still requires processing into oxide, which we will plan to do here in the United States. With the SPV, we can deliver mixed rare earth carbonate to it, we can deliver oxides, and we can deliver anything all the way up to magnets with the SPV.
For Round Top, again, we hear about the [HREE] system and, again, seems to be the one that's been around the most. Maybe talk about timing of what you all are projected for timing, and then with that is, are we waiting on feasibility study? What are we waiting on now to see sort of steps for Round Top.
Yeah. Round Top, we're already up and running with all of our larger scale pilots. Those are already running right now. We've got our demo facility that's being finalized right now. We're planning on finishing our internal work on our DFS by year-end.
Oh, wow.
Publishing an S-K 1300 by Q1 of next year. That is the current plan, and that is consistent with the plan that we've outlined for the Department of Commerce.
At that facility, you will also process, or will that be strictly just mining and separation? What's sort of the plan in Texas?
Yeah. At Round Top, we're going to be doing the mining and the separation process for Round Top. We will also have another facility, location to be determined, that will also do processing and separation for essentially third-party feedstock. Think Serra Verde, and also our own swarf and recycling. We'll have essentially two processing facilities in the United States.
The composition, again, we hear about from a lot of these. Again, MP's been around a long time. The problem, of course, at Mountain Pass, they just don't have a lot of the heavies. Maybe talk a bit about the composition. I know it's early, but what you can produce, or what they have been producing at Serra Verde versus the expectation. Again, when you think about it, is it just the heavies? Is it NdPr? What should we expect?
Serra Verde's run rate's about 6,400 metric tons per annum, about 30%, a little under 30%, 28%, 29%, is NdPr. The heavies, the magnetic heavies are somewhere between 2% and 4% of that basket, and the rest of it, they've got a lot of yttrium.
Okay.
Similar size as the NdPr and other rare earths that we can separate out and process. That's kind of what their basket looks like. That differentiates versus Round Top, which is not producing any light rare earths. We're not going to separate and process that. Those will all get kicked into our tailings, and that mine is really focused on gallium, hafnium, zirconium a heavy rare earth concentrate product, dysprosium, terbium, gadolinium.
Got it. Okay. I know you all put it when you bought it. Maybe talk, what's the mine life or what are you all suggesting? Again, is there an issue? Is it 20, I forget, 10 years, 20 years? At Serra Verde first, and then, I don't know, Round Top how much further out.
Yeah. We haven't published Round Top, but it's north and we'll say what the mine life is when we come out with our S-K 1300. It's a North of 20-year mine life at Round Top. Serra Verde is essentially a 15-20 year mine life with their first phase, and their second phase is a similar mine life.
Got it. Okay. Can you talk maybe in more color? I think the deal with Carester is very interesting because, again, as you said, there's bottlenecks all around, but to me, the processing is just such extreme right now.
Yeah.
To pull something like that, maybe let everybody know. How that sort of came to be, what the position is, how you're going to work with this company. For y'all, a lot of it don't know. I think those guys came from Lynas back in the day, I think.
Solvay.
Solvay, I'm sorry. Solvay.
Outside of China, the only remaining real heavy rare earth, or light and heavy rare earth processor was Solvay. The Carester team came out of Solvay and was working on heavy rare earth processing and also recycling. The ability to take recycled magnets and turn them back into oxides. That was a unique capability, and when we were doing our work last summer, we saw them as a standout with that capability, we became very interested in working with them. What's unique about what they do is they have the ability to work with mines and create a custom intermediate product that they can process in France.
That's really interesting. Essentially, they can franchise processing. What's not well known is that most processing facilities are generally somewhat bespoke for the mine that they're processing for. like our Round Top separation and processing facility is for Round Top. It really will not be able to process efficiently other forms of feedstock. Yeah. What's really cool about Carester is they have the capability to work with the mines, create a roughly similar product, and then process it into heavies and lights.
Do you have the ability, I know you have the 12.5% interest, but will you have the ability as you all start ramping up to continue to use more and more of their processing, or what is that ramp like?
Yeah. We have a supply and offtake agreement with them. We supply them with feedstock, we get offtake from them. We also have the ability to process all of our swarf through them for the next several years and get that back. That'll be a source of supply for us. We have the ability to utilize their technology, through a licensing arrangement. Basically, wherever we agree with them, we can use it.
I know that Carester has, what is it? Over $200 million backing from the, is the French government, I guess, from when they come on? Is the government have some sort of first right or anything there, or that's just them backing?
No, the French government doesn't have any commercial arrangements with them with regard to their offtake. The French government is just very interested in bringing back this capability to France.
Okay.
That's kind of what you're seeing in this arrangement. In Lacq there'll be a separation and processing facility, which is Carester. We'll have LCM, which is metal making. You've already seen in our announcement on Monday that we're talking about the prospect of magnet making in the South of France.
South France. Okay. Maybe talk, we didn't hit today what in Colorado, in Wheat Ridge, you have a pretty unique facility that. I've seen that maybe talk about how long that's been around, the benefits of having that and what.
Yeah. I love Wheat Ridge. Wheat Ridge is our mining lab. This is where all of the work regarding processing and separation takes place. It's also where we're developing our mine plan as well. It's a bunch of folks from University of Utah, Colorado School of Mines, all the great mining schools in the United States have come together in this, for lack of a better word, our own pirate ship, as we call it, the people that are just getting after it, developing this capability. That's where the laboratory will be. The actual capability though will be built out down at Round Top in Sierra Blanca .
Okay. That's right in there. Okay. As we keep moving sort of further downstream, you mentioned with LCM, Less Common Metals, when you bought that, have you already started? I know there's some plans. Maybe talk about you'll expand on-site as well as simultaneously over in France as well.
Absolutely.
What are you at now and how quickly can you expand?
Yeah. We're expanding, we're ramping up to 2,000 metric tons of capacity right now in the U.K. In France, what we've already talked about is our first phase of north of 3,000 metric tons of metal making there. We're currently securing a facility in the south of France to build out that ecosystem. What we're trying to do is put in a facility that's going to be large enough for expansion to meet our needs going forward. We're going to basically take their capability from the U.K. and train people up and bring it to the United States as we start ramping up Stillwater.
Make sure everybody understands here, if you have a facility like that, maybe walk us as you're starting again from the upstream, and you have something like LCM. Does it require a very specific oxide? From that, is that turning into a very specific alloy that then finally goes to Stillwater? Maybe c onnect the bridge between maybe what's coming out of Serra Verde , what specifically is needed, what then goes through LCM, and then what ultimately ends up in Stillwater, because there's a lot of, I think, specifications that people don't fully appreciate.
Yeah. If you're making heavy rare earth magnets, let's say we're making 1,000 tons of heavy rare earth magnets. Of that, call it 30% will need to be NdPr. Somewhere between one and a half to 6% will need to be dysprosium, and then to the extent you're using terbium, a smaller percentage, maybe like a point of terbium. Let's just use 4% as a measure for dysprosium, and this is a heavy rare earth. For every 1,000 tons of production you need about, or every 1,000 tons you need about 40 tons dysprosium for that. It's a lot.
It's a lot. Okay.
It's a lot. That's for a 4% grade. If you're doing a grain boundary diffusion at 1.5%, then it's 15 tons . If you're doing something that's super high grade, like a UH magnet, you might need 6% dysprosium, which is 60 tons. That kind of gives you a sense of the range. The point being is you need heavies. You need a lot of heavies to be able to do that. A mine like MP will only produce in the tens of tons of dysprosium a year. It's not enough to do a 10,000 metric ton facility. Serra Verde, for example, that mine will produce something on the order of around 150 metric tons of dysprosium a year. You can do the math.
It's up to 10,000 metric tons of magnets if you're using grain boundary diffusion or some of the light rare earth formulas and about, could be a third to half that if you're using super high grades. That's kind of the range and that's why you need something like Round Top up and running, which will produce more than twice the volume of dysprosium and terbium that Serra Verde will.
Then again, continuing downstream, maybe talk a little bit, as I said, I've been there now several times in Stillwater. I think it's a pretty unique facility. Again, how did that facility sort of come to be? The backing from, it seems like the city, the state, I mean, you name it. Maybe give a little background of how you found the facility.
Yeah. They found the facility, it was before my time. They found the facility like seven years ago, what they were looking for was a facility where they could get incentives because they were trying to raise money, and they were trying to be as efficient as they could be. They found a 450,000 sq ft Rolling Stone printing facility. It's literally what it was, printed Rolling Stone magazine. They bought a set of Hitachi equipment good for about 1,200 metric tons. That equipment was gently used to develop Hitachi's patents and protect Hitachi's patents. They picked that up, and essentially where we stood 14 months ago was the facility and the equipment, but nothing was hooked up yet.
What we've done over the last year to get a commission is really just stand it up and get a commission. The city and the state have provided us with, fortunately, a level of incentives that are helpful. They're small, but they're helpful. We basically got the building for a song. That's why we can scale it so efficiently. Now, the building was not purpose-built, and so one of the reasons why we're moving to Blacksburg is what we talked about, is to increase certainty. We are going to be able to build a purpose-built building that will allow us to be as timely and efficient as we possibly can be with our next phase.
Maybe talk about both in Stillwater and then if we even went back upstream. Again, what type of backorder and, again, now if I'm trying to find, as you scale either South Carolina, as you scale, I don't know? You could start with, again, we could start all the way upstream again at Round Top, and as you're building that out, whether it's on the separation side or other, again, how tight is equipment, and is most of it coming from China or where do you get that now?
Yeah, domestically, we're sourcing all of our equipment outside of China. With our DOC transaction, we can actually source from China. They just won't pay for it.
Right.
It's better if we're going to be ITAR compliant not to use Chinese equipment because it can be bugged and all that kind of stuff. It's going to be all non-China equipment. In order to hit our timelines, we just have to be able to order the equipment on time. Some of the equipment does have lead times as much as 12 to 14 months. Essentially, if you build your business plan and you map it all out, then you can basically schedule the orders of equipment. We work with multiple vendors across every component of heavy equipment that we utilize at every stage, from the mine to the metal making to the magnet making.
Oh, okay. Remind folks here, as you ramp, what's the plans? Maybe I'll walk back from downstream again, but starting with Stillwater, you just mentioned earlier, I know you're at half a line, 600 metric tons. What's the plan and how quickly you believe that Stillwater will run?
Yeah. It goes basically from 600 to 10,000 metric tons fully commissioned by mid-2029. I think the second half will be starting to run at full capacity of 10,000 metric tons.
That would be another, because you can do what? Four lines, is that right, in the existing facility? Something like that.
We're going to do.
In the existing.
At Stillwater, we're actually going to do three lines. We're going to do 3,600 metric tons. We're going to do 5,000 in metal making there. We'll actually have capacity for metal making beyond that, but we'll stick to 5,000 right now, and then we'll do 5,000 in metal making in Blacksburg, along with 6,400 metric tons of magnets.
Okay.
It'll be a slightly larger facility. It'll also have slightly more capability to be able to finish and coat at Blacksburg.
If you work your way back upstream, as you're ramping up, will you have to source any of that from third party, or you'll be able to get that from LCM, which will get that from either Carester or somebody, or Round Top? You'll be able to procure all this yourself as you continue, as I start upstream and get all the way down to either Blacksburg.
In terms of ultimate feedstock?
Correct.
Yeah. We'll be able to supply all of our heavies ourselves. Yeah.
Okay. Will there be, I guess, to ask it even another way, is if you look once Round Top cranks up, once even LCM is built out even more than others, will you even have excess, think about it, the other side, to sell to third party?
We might. It all comes down to what formulas we're actually selling. And what p ercentage of the heavies we're actually going to use going forward. If we have a lot of orders for grain boundary diffusion, which might be a 1%, 1.5% dysprosium, we're going to have excess. We'll have some excess. I doubt that's going to happen. I also doubt that we'll be at all 6%, super high-grade magnets either. It's going to be somewhere in between. We s hould have some level of excess, and we already have demand for it. People are already coming to us wanting to buy that.
Can you talk about burn rate modeling all the time? Again, I know numbers are moving around a bit. Maybe let everybody know here, again, after doing the PIPE, after having the government contract, where finances sit today, again, as you see it. Again, nothing more than what you've said, of course--
It was $1.75 billion at quarter end. Once we finish the DOC deal, that'll give us access to another $1.577 billion, $1.6 billion, which puts us in a really good position to be able to execute on our capital plan going forward. I think we feel really good about where we are.
From that capital, again, will most of that, is the higher CapEx coming from more upstream from, you do more from Round Top or is it sort of equally, again, as you scale up the lines, even all the way downstream at the magnet facility, whether that be in Oklahoma or South Carolina? Again, do you have ideas of what kind of CapEx from each of the sort of segments?
Sure. Yeah. We haven't broken it out for people exactly. If you look at our total capital plan, in the United States, it's about a little under 50% is going to be the mine.
Oh, it is? Okay.
That's domestically.
Just Round Top then, or Serra Verde as well?
Not Serra Verde.
Oh, I'm sorry. You said just domestically.
Yeah. Domestically. Serra Verde is fully funded.
Yes. Okay.
There is more CapEx there, but it's all in the capital plan already. It's completely embedded in their structure. In the United States, it'll be about a little under 50% of our capital is going to be from the mine. The rest of it is going to be from metal and magnet making.
Got it. I know, Chip, a couple of minutes. I know we can, again, in the breakout, definitely want to ask you more even on macro. Of course, prices are all over the place. I thought you all had a good slide. I'm trying to think it was the last one or one before, where you showed, again, what your price floors were, what you showed Chinese prices were, what you showed non-Chinese prices were, and again, whether it's critical minerals, rare earth, antimony, you name it, they're all over the place. Have we seen any, I guess sort of my last question today before we, and we can move some of the more of this macro sort of rare earth questions to the breakout.
Do you think we've seen any stabilization yet? You don't think so?
No.
Okay.
No, prices are all over the place. They're actually higher than what we showed in our presentation. The market, it's really important, if you're actually trading in this stuff in any volume, it's not a liquid market. It's a very bilateral market.
That's the problem.
Yeah. Think of it like the swap market. It's literally an agreement. You find it, and you come up with an agreement, and you trade on it.
Is that because China is still flooding? I know it seems like every time Trump and the Chinese president meet, there's speculation that China's going to help subsidize, and then U.S. government says they are, and China government doesn't comment it, and then all of a sudden prices go back up. Sort of last question before we head to breakout, is that do you think why we continue to have that kind of pricing market is because of what China is producing behind the scenes, or rather, what is the rationale behind that, do you think?
It's, one, restrictions from China, and two, lack of non-China availability. The places where you can get ex-China and non-China feedstock are very, very few.
Few.
Fortunately, we have the connections to get them, but it's a very over-the-counter type of market.
Got it.
People literally don't trade on any of the indexes or anything like that.
Good. We'll move. Again, I have several more questions for you, but we'll move that to breakout. Thank you so much, guys.
Great. Thank you.
Thank you, everybody, for coming.